Millennials currently comprise the largest generation in the U.S., according to Pew Research. This generation, once marked by ambivalence or inability to buy homes, has begun to reconsider its goals – powering this year’s housing-market rebound.
In 2020, millennials will be buying the bulk of real estate in the U.S., according to Realtor.com’s “2020 Housing Market Predictions.” In their forecast, Realtor.com predicts that millennials’ share of mortgage originations will surpass an unprecedented 50% in the spring, outnumbering the share of total homes purchased by members of Generation X and baby boomers, at a respective 32% and 17%.
The largest age bracket among millennials, 4.8 million, will be turning 30 this year and starting to reach the same milestones previous generations did in their thirties, such as starting a family. New financial and family needs may likely push them to search for new homes.
Despite the obstacle of low inventory of homes on the market, millennials are not likely to compromise on the condition of the home is in part because of their lack of experience as homeowners, says Danielle Hale, chief economist for Realtor.com.
“Millennials want almost instant HGTV-approved living,” says Michelle Sagatov, a real estate agent with Washington Fine Properties in Arlington. “They’re not usually willing to put in elbow grease on making something their own through a renovation. As long as it’s on trend enough, they’re happy to just bring their furniture and their toothbrush and move in.”
Understanding the priorities and preferences of millennial buyers is important to developers and to home sellers who want to target buyers in that age range. Millennial buyers who have been living in luxury rental buildings have high expectations for amenities that they have to revise once they realize that fewer condos have those amenities and those that do have high condo fees, says Trent Heminger, a real estate agent and executive vice president with Compass real estate brokerage in Washington. Once they realize that owning means they may have to give up things such as a rooftop pool, millennials tend to prioritize the ability to have a pet and some outdoor space over other features.
“Millennials, they’re roaring into homebuying age,” said Rick Arvielo, chief executive of mortgage lender New American Funding. “What the industry’s been talking about for a decade is whether they’re going to follow their predecessor generations in terms of their desire to own homes,” he said, adding, “Yeah, they do—they have the same desires.”
Younger buyers were a big reason why home sales continued on the path to recovery in July. Sales of previously owned homes surged almost 25% in July to their highest seasonally adjusted annual rate since December 2006.
The National Association of Realtors reports in Homebuyer & Seller Generational Trends in 2019 that 81% of older Millennials found their home through a mobile app. First-time buyers accounted for 34% of sales in July, up from 32% a year earlier, NAR said. There’s no guarantee millennials’ robust demand will last. A persistently high unemployment rate among millennials could slow homebuying among the group in coming years.
A strong housing market can be a positive sign for the economy, as home purchases can lead to increased spending on furniture, appliances and renovations. Home builders have also expanded activity in response to the demand. Some equity analysts have pointed to a strengthening housing market as a reason for the U.S. stock market’s resurgence, despite high unemployment and concerns about the continuing pandemic.
Even though Millennials have been adults in a consistently low interest rate environment, the barrier to entry to the real estate market has been high for this generation. It also shows that as Millennials continue to be the largest segment of home buyers, they are going to demand that the market caters to them.